The Obama administration today formally rejected a bid by Canadian energy company TransCanada to build a $7 billion oil pipeline linking the tar sands of Alberta to refineries on the Gulf of Mexico.

The Keystone XL project, which was estimated to create thousands of U.S. jobs, became an election-year lightning rod, embroiling President Obama, congressional Republicans, labor unions and interest groups in a heated debate over jobs and the environment.

The State Department, which holds the authority to approve or reject pipelines that cross an international boundary, said in November that it would delay a decision on Keystone to allow for further study of the environmental impact along its 1,700-mile route.

Then in December, Congress tried to force the president to make a decision proposal within two months, tucking the mandate into the payroll tax cut bill that Obama ultimately signed into law.

But the president said today in a statement that the congressionally imposed deadline did not provide adequate time for the State Department to finish a customary review of the pipeline's route through six states.

"The rushed and arbitrary deadline insisted on by Congressional Republicans prevented a full assessment of the pipeline's impact, especially the health and safety of the American people, as well as our environment," Obama said.

"As a result, the secretary of state has recommended that the application be denied. And after reviewing the State Department's report, I agree."

Administration officials say the decision effectively hits the reset button on a review process that has been underway for several years, but does not preclude TransCanada from resubmitting a proposal for reconsideration.

"While we are disappointed, TransCanada remains fully committed to the construction of Keystone XL," TransCanada president and CEO Russ Girling said in a statement.

"Plans are already underway on a number of fronts to largely maintain the construction schedule of the project. We will re-apply for a Presidential Permit and expect a new application would be processed in an expedited manner to allow for an in-service date of late 2014," he said.

Labor unions, oil industry groups -- even the president's jobs council -- have signaled support for the plan, which also has bipartisan backing on Capitol Hill. But environmental groups warned it would have a dangerous effect on ecosystems and human health, ratcheting up pressure on Obama to defer to his progressive base in an election year.

"This announcement is not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline that prevented the State Department from gathering the information necessary to approve the project and protect the American people," Obama said.

"The president has said he'll do anything that he can to create jobs. Today that promise was broken," Boehner continued. "The president won't stand up to his political base, even in the name of creating American jobs."

Rep. Joe Donnelly, a Democrat from Indiana, said he is "very disappointed" in the Obama decision. "They are missing an opportunity to create thousands of jobs in America," he said.

House Minority Leader Nancy Pelosi defended Obama, blaming Republicans for effectively tying the administration's hands. "If the Republicans cared so much about the Keystone pipeline, they would not have narrowed the president's options by putting it on the time frame that they did," Pelosi, D-Calif., said.

Meanwhile, environmental groups claimed victory over the oil industry, which had spent millions lobbying intensely for approval of the pipeline.

"The Keystone XL fight was David versus Goliath; no one thought we could win," said Dan Moglen of Friends of the Earth. The decision shows "sustained grassroots pressure aimed at holding the president accountable to the public interest proved more powerful than all the lobbyists the oil industry could muster."

Frances Beinecke, president of the Natural Resources Defense Council, praised Obama for putting "the health and safety of the American people and our air, lands and water -- our national interest -- above the interests of the oil industry."

But the U.S. Chamber of Commerce, the nation's largest pro-business lobby, said the interests of Americans looking for work were cast aside in what was "a politically charged" move.

"By placing politics over policy, the Obama administration is sacrificing tens of thousands of good-paying American jobs in the short term, and many more than that in the long term," chamber president Tom Donohue said in a statement.

"It is dumbfounding that President Obama's decision to deny the Keystone XL pipeline permit ignores his own Council on Jobs and Competitiveness "Road Map to Renewal" report. Issued yesterday, it recommends that the United States step up its game on energy and construct pipelines to deliver fuel as a key component of our economic recovery."

Administration officials have denied that politics played a role in the decision, citing established precedent for careful review of the environmental impact of major projects .

It is a "non-political, professional process that has been in place long before this administration came into office," White House press secretary Jay Carney told reporters today.

Carney would not comment directly on the administration's decision or why it was made.

Keystone on Campaign Trail

Obama's decision on the pipeline also reverberated on the presidential campaign trail, drawing rebuke from the Republican candidates.

"This is a stunningly stupid thing to do," said former House Speaker Newt Gingrich at a campaign stop in Aiken, S.C. The administration is "so out of touch with reality it's as though they were governing Mars. Stupidity No. 1, we need the jobs. Maybe when they're unemployed in November they'll figure out jobs matter. "

Texas Gov. Rick Perry addressed Obama directly in Greer, S.C., saying "you've just basically said to Americans, we're going to allow the Chinese the opportunity to negotiate to go get that oil rather than America."

GOP front-runner Mitt Romney said Obama demonstrates a "lack of seriousness" about doing whatever it takes to accelerate job growth and economic recovery.

"He seems to have confused the national interest with his own interest in pleasing the environmentalists in his political base," Romney said in a statement.

Obama campaign spokesman Ben LaBolt countered Romney's charge, charging that former Massachusetts governor's opposition to the pipeline demonstrates that he would "rubberstamp whatever the Republicans in Congress demand of him."